Having debt is a huge responsibility and paying back the debt is even a more colossal responsibility and stress. Even if you take a loan, it should be your priority to pay back the loan so that you can be saved from future money and debt problems. If you don’t pay back the debt, you might encounter some bug troubles. For example, who might garnish your income, you might have to go to court; your life is impacted.
Impact on credit card:
The greater your debt, the more it will impact your credit score and credit card services in a worse way. If you fail to pay your credit balance in the United States of America, it will affect you badly. You might not get the job because of your credit card history, and you might not be able to buy a house; you will not be given your future loans and balances. Thus not paying the debt has severe consequences. So the credit card debt process occurs according to the 30-60-90 day rule:
Firstly, when you are late for the first payment, your credit card will have a status of ‘late,’ and a penalty fee is applied to each of your pending charges. The Bank or your credit card company will deal calmly first. They will start to send you messages, call you, you will even receive notifications, emails, and letters from their Internal collection department.
When you are 60 days late and miss your second payment, the credit card company will adopt harsh behavior. They will apply higher interest rates, additionally $20-30 as the late payment fee on every pending payment you have. The Bank will leave a negative remark on your credit card.
By this time, the credit card issuing Bank will stop the purchases from your account and contact a collection company. They sell your loan to third parties who adopt many harsh measures because the credit card company is sure that you won’t pay them. These collectors might even sue you. The credit card company will charge your card off, you might be able to pay the debt later, but your credit score is badly affected, and you will face severe problems regarding your credit cards.
A collector can go to extreme levels if you don’t pay the debt. You will have to go to courts often if a collector files a case against you and sue you for not paying the debt in the limited time or delaying your payments continuously. Debtors filing a lawsuit is not ubiquitous, but if you have a property or some other ownership, he will sue you for judgments. Firstly, you receive a notification from the court, and then the trials might start. Immediately respond when you receive the orders.
If you are unlucky and the court gives the order against you, you have to pay a huge penalty fee, which might be more than you borrowed. In most debt collection cases, the court gives an order against the debtor, which proves a benefit to the debt collector.
The court can even dismiss your future incoming salaries. One can ignore the collector calls, but who can never forget the court orders. If perhaps you don’t follow the court orders or ignore them, then law enforcement might interfere with the court’s summons. Whenever you receive a court order, try to consult an attorney immediately; otherwise, you will get in trouble. An attorney is essential in dealing with such a case because every state of America has different debt laws. Your attorney will guide you accordingly to the law and regulations of your condition.
Garnishment of wage:
Garnishment of income is basically when your money e has garnished the court’s orders. It is not given to you. Instead, it goes to a third party. The third-party in the case of debt is a debt collector. Not all the employee’s wage is garnished, but the central portion of income is called garnished. Every week at 25% of revenue is trimmed when your pay is above dollars 290.
Meanwhile, the court also orders the company not to fire him until all the debate is cleared. And the process is completed. Garnishment laws vary from state to state. According to federal law, only 25% of your income is garnished, but the percentage ranges from 15 % to 30% in some states. In this case, you have to follow the state law and not the federal law. This garnishment is only allowed when the court gives an order, and nobody is allowed to garnish wages except the court.
You will experience problems with interest in two prominent cases. When you don’t pay the debt, the Interest rate on your loan increases per day. At some point, the Interest rate becomes so high that it is more than the money you borrowed. If you delay paying your debt, these interest rates continue to add up, making a pile of money in the end. One should pay their debts before the limited time; otherwise, the debt money, penalty fee (in some cases), and the highest interest rates load up.
The second case where Interest rates become a problem is when you have a bad credit history, you don’t get approved loans from anywhere. No bank is ready to risk giving you a loan, or not even a person will provide you with loans. In this case, if some bank or a person agrees to provide you with a loan, he will then charge a much higher interest rate than the usual.
As a result of credit card history, your subscriptions also get affected, for example, cable, mobile bills. Such services don’t cut you off by seeing your credit history, but they might charge you extra. These services will take a security deposit before providing the services. However, the security deposit is returned once you can pay back the debt.
Continuous collector calls:
Debt collector agencies will continuously call you and send you notifications to annoy you and get the debt. Continuous calls are disturbing and irritating; even if you stop them, they will continue to call to remind you to pay them.
Federal law states that agencies can not call you when you are at work, and they can only call between 8 am-9 pm. If you send them a cease-and-desist letter, they will stop, but when a collection agency cannot get money from you, who will assign the responsibility to some other agency. The cycle will continue, and you will have to send the letter again and again to different agencies.
Debt collector agencies are different from a person whom you own money. If you tell or send the debt collector agency to stop calling you, they will eventually stop calling you accordingly to the federal law and will do it once in a while to remind you. But individual persons do not care about the law, and they will still call you.
Collectors might take the law into their hands:
Some debt collectors do not care about the law. Even if the federal law states that collectors can not call you, they still won’t stop. Debt collectors might even go to extremes threatening you and your family or might use their physical power to intimidate you.
Some debt collectors don’t have contracts, and they will not write the actual payments on paper as a piece of evidence. In this case, the collectors will keep adding extra money. For example, you pay them a few dollars or transfer it through some bank account. They will not own the record on paper; instead, they will confirm it over a voice call. In this way, there is no evidence that you paid money, and they will continue asking for more money. So it’s better to pay off your debt instead of refusing it.
Hunts for a new job:
If you are not paying debt, you have a nasty remark on your credit card. Eventually, you will have a bad credit history. Because of these debts, you might be unemployed, and if you want to look for a new job, you will have problems finding it. Why? Because most of the company or even part-time employers ask for your credit history. You might get rejected because of your worse credit history. It does not happen usually, but if you are unlucky, you might get affected by it.
Consequences of not paying different types of debts:
There are different types of debt, and the conditions vary from the kind of debt. The reasons why people don’t give back debt is a grim reality. People have to deal with many harsh debt collector agencies, and America is known to have the most obligation. The debt laws are different for different types of debt.
America holds almost $1.4 Trillion student loan debt. A student loan is when you take a loan from the government or a private loan just for your educational purposes. The treatment of federal government and private agencies is very different.
The federal government is flexible with the people who are under student debt. According to the law, students have a pretty long time to pay back their debt; students are provided loans with lower interest rates, better borrower security, and flexible repayment plans. Even if they don’t pay back in time, you still have a 270 days grace period from the last date. Firstly they will warm you to pay the debt, and if you don’t, then according to the law, the federal government can garnish your paycheck, tax refunds, and social security funds. Private collection agencies are much harsher than this, they don’t follow the law, and they even sue you.
All this will leave a bad mark on your credit history, and you will face problems in taking out loans in the future.
Auto debt is when you specifically buy a car on loan. According to the stats, America has $10 Billion in auto debt up till 2016. The result of auto debt varies from the lessor to lessor, and it depends on your contract.
If you miss your first payment, you will most likely get a notification shortly. If you keep forgetting your income, then the lessor can repossess your car. The lessor can not take your car forcibly. Otherwise, it will be considered breaking the law. However, the lessor can deactivate your vehicle by using a device known as a starter interrupt device. In this way, the motor’s ignition system is deactivated, and you will not be able to use the car. In such a case, you will have to pay a termination fee. Your creditworthiness will be affected as well.
Medical debt is your medical bill in the specific hospital where you are getting treated. Medical debt is most common in an emergency, and almost 45 million Americans have unpaid medical bills, which are medical debt. The majority of the people are unable to pay back the medical debt. If you don’t pay your medical bill, the doctor or the hospital will hand your loan to collection agencies who will preferably sue you.
If you are underprivileged, the doctor will give you a discount on your medical bill, but still, one should try to provide the medical bills because even this will affect your credit score.
The most significant portion of debt in America is the mortgage debt which, according to the reports, is $8.63 trillion. If you miss your first payment in America, you will be given a grace period of 15 days. When the grace period is over and if you still haven’t paid back, 2- 5% of late payment fees are added. After 2 seconds of missed payment, your house will go into default, and the housing department will take action.
After 90 days, you are given a letter of demand. It is your last chance to pay back. After this, the lender will be allowed to put your house on auction, so eventually, you will have to vacate the house. It will badly affect your credit score, and you might not get a place in the future on loan.
How to repay your debt?
Before you start repaying debt, try to identify the kind of debt you have, whether it’s credit card debt, student loan debt, car loan debt, or something else. It would help determine how much obligation you have to make a personalized plan for debt payoff. .who must consider the following strategies
1.Create a budget
It is the most significant step to solve your debt problems. It would help if you devised a plan according to your monthly income to reduce your expenses as much as possible. The budget will help keep you on track as you work toward paying off debt, and it gives you peace of mind knowing exactly where your hard-earned money is going.
2.Payoff the most expensive debt first
As more expensive debt charges higher interest rates, it’s better to get rid of the highest debt amount. By this strategy, the credit card payment with the highest annual percentage rate is increased while you can make the minimum payment on the rest of your credit cards.
3.Debt consolidation loan
Debt consolidation might be a good idea for you if you can get a lower interest rate. It will help you reduce your total debt and reorganize it so you can pay it off faster. If you are supposed to pay a manageable amount of debt, then it is a sound approach to tackle your problem.
4.Change your habits
Spend some time thinking about how you spend money each day. Avoid spending on luxuries and unnecessary items. Make yourself valuable to the necessities so that you can get rid of this mess as soon as possible.
5. Ask a relative or friend
If you can get in serious trouble by not paying, it’s better to ask your friend or a relative. Your family’s support is essential in these matters. Take the loan from your friends or relatives and payback to the Bank or the lender.